It’s been a rollercoaster 12 months, to say the least, as the UK plunged into a cost-of-living crisis, an energy crisis, and a housing crisis all within this short amount of time. Every industry has felt the strain, and the property sector has been no exception.
With depleting mortgage rates and a bounce back in the labour market, Q1 2023 has seen the highest level of demand for homes since October 2022.
According to Zoopla, soft house pricing has continued throughout the first few months with prices 1% lower than they were in October 2022. Additionally, inflation has slowed to 4.1% with the market ending this quarter better than expected.
More than 500,000 sales are now anticipated by the end of H1 and potentially over 1m sales in H2. Buyers and sellers are striking deals at an increasing level, alongside rising property availability.
There are 65% more homes available in comparison to this time last year, but sales trends have shown a new gravitation towards more affordable and better value for money markets.
Although, one of the more surprising pieces of data has predicted activity growth within the inner London flats market in 2023. Despite this, rental inflation will continue to support property demand from first-time buyers.
Demand in Q1
Buyers have been returning to the housing market following an influx of new sales being executed.
Since the fallout from the mini-budget last Autumn, the last few weeks have seen housing demand reach its highest level since October 2022. This is also 16% higher than Q1 2019 levels.
Housing demand in London, the North East of England, Wales, and Scotland are all performing above average and are parallel with a rise in demand for affordable housing.
Overall, every region has shown and continues to show improvement in the market but as expected, demand levels have slowed where house prices are above the national average.
Sales in Q1
Whilst the rate of sales agreed is 16% lower than 2022 Q1, sales are actually on the up and currently sit 11% higher than they were in 2019.
The undersupply of housing in 2022 ultimately forced prices to increase and has been to blame for a lack of sale completions.
Estate agents now have an average of 25 homes for sale, compared to last year, where they had around 14.
This has considerably improved buyer’s choice and spectrum for movement, a really positive sign going forward. Sellers will now need to ensure they are pricing their properties sensibly if they are looking to move.
By making the necessary price adjustments, this will help guarantee sales and best match the expectations of prospective home buyers. Sellers have been able to make adjustments, following the scale of price gains throughout the pandemic, which has allowed them to continue executing agreed sales.
From the time a property is first put on the market to going under offer, the time it takes to sell a home has significantly changed since last year – jumping by 71% - equating to 15 days in total but time to sell rates are still under 2019 levels across the board.
It is expected that there will be half a million sale completions in H1 2023. These completions are essential for mortgage lending. Zoopla has forecasted that by the end of 2023 the market will witness over one million in sales, overtaking the levels seen following the financial crisis of 2008 – 2011.
Despite the current political and financial scene, the motivation to move home and buy will continue to support market activity, although, cost of living pressures will see a small fall in demand for larger builds.
An increase in share of sales will be supported by lower price bands going forward. This has been prompted throughout Q1 from those looking towards more affordable properties as homes in the higher priced top 40% see a drop in share of sales.
Down from 9% in 2022, house price growth has decelerated to 4.1% year on year as data shows a negative price growth for the past three months. The market now faces national repricing, as Q1 of 2023 has proven to be the weakest quarter for price growth since 2011.
Overall, the housing market is in much better shape than anticipated and is possibly more balanced than it has been in the last three years. Data has even shown that the inner London housing market has already begun its journey to recovery as first time buyer numbers hold up.
This is great news for lenders, builders, and estate agents as activity continues to increase into Q2.
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